Exchanging money overseas

[tipz]

What is the name of your state? New Jersey

My parents live in South Korea. They want to help my husband and I to buy a home in New Jersey. The Korean Gov't wont allow them to transfer out a large sum of money. So, they asked an american friend of theirs, "Bob" that lives here in the US to give us a lump sum of money. In exchange, they will give "Bob's" family in Korea an equal amout of money. Thus Bob gets money to Korea and my parents get money to the US without actually transferring any money overseas.

What are the legal ramifications of this? Is there gift tax due?

 

[Some Random Guy]

THe US Government shut down dozens of Somali money exchange businesses which used a "hawalad" system similar to this. They cited concerns about money laundering and ties to terrorist groups. Read up on this and see if has any afffect on you.

It seems like a reasonable system to avoid overseas transfers, but I would consult with a Tax professional to see what would happen if the IRS decided to audit Bob or yourself.

 

[abezon]

From a tax standpoint, you only need to notify the IRS if your parnets give you over $100,000 in a year. If they do, you'll need to file form 3520 to report the gift. There's no tax; you just need to report the foreign gift.

Bob will need to file a gift tax return to report the gift to his parents.

Be sure you have everything in writing so you can document intent to avoid international money transfer problems & show that the two gifts match.